Mike Lynch names Vatican and Kraft as Autonomy case goes public

Former Autonomy CEO Mike Lynch has responded to HP’s formal litigation against him and former CFO Sushovan Hussain, highlighting major user contracts

Former Automony CEO Mike Lynch (pictured) has responded to HP’s formal litigation against him and former CFO Sushovan Hussain, highlighting major user contracts.

The Vatican, Kraft Foods and the Veterans Association in the US are among a number of multimillion-pound Autonomy software deals Lynch published details about on the AutonomyAccounts.org blog.

The contracts were among those scrutinised by HP, which claimed Lynch and Hussain made dubious reseller deals.

HP stated Lynch and Hussain caused Autonomy group companies to engage in improper transactions and accounting practices that artificially inflated and accelerated the firm’s reported revenues.

HP also said the pair caused Autonomy to understate its costs of goods sold (thereby artificially inflating its gross margins), misrepresent its rate of organic growth and the nature and quality of its revenues, and overstate its revenues and profits.

Lynch has now published his legal response on the Autonomy Accounts blog.

"We utterly refute the allegations made against us," he wrote. "HP has waged a three-year smear campaign riddled with half-truths and obfuscation. 

"They have intentionally made the claims as complex and convoluted as possible. This is why, in the interests of transparency, we have posted a series of updates to this blog today so that everyone can see the allegations for themselves and fully understand our position."

Read more about the HP-Autonomy dispute

Lynch said hundreds of key Autonomy employees left in the year following HP's acquisition of the firm.

"HP never integrated Idol and Vertica to create the new product on which the acquisition was largely predicated. HP’s pre-existing staff actively worked against Autonomy by marketing its competitors’ products, due to dysfunctional internal incentive structures," he wrote in the blog post.

Lynch also claimed HP mishandled the pricing of Autonomy products, sometimes heavily discounting them to incentivise HP’s low-margin hardware sales and at other times marking them up significantly to boost the revenues of lagging HP departments. 

He stated that even though HP had been running a software division for three years it understood very little about how the business worked. 

"HP makes much of the fact that Autonomy often closed deals at or near the end of a fiscal quarter," wrote Lynch. "That misplaced emphasis simply illustrates how out of touch HP is with the nature of the software business that it supposedly has been operating for three-and-a-half years now."

He also highlighted what he claimed was a "comical" assumption made by HP’s executives that customers would be prepared to buy storage at the same price they paid five years earlier. 

"If a customer bought 1TB of storage five years ago for $100,000 but can purchase the same amount of storage today for $50 from you and for $49 from your competitor, is there any chance that the customer will be willing to pay $100,000 for this storage from anyone?"

Lynch counter-sued HP in March 2015 following the computer maker’s London court appearance, when it lodged a $5bn claim against the former Autonomy chief and Hussain.

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